Scary, Inconsistent Market News

Scary, Inconsistent Market News

Business Insider has an article, paywalled, suggesting that the experts say the market crash panic has not peaked; it’s “merely the end of the beginning.”

Yahoo has an article suggesting that company stock buybacks will save the current bull market.  They caveat that optimism with the idea that if it doesn’t it’s another bad signal.

Market Watch has a story that one analyst, Scott Minerd of Guggenheim Partners, thinks we could get a 20% rally soon, followed by the big crash.  While they acknowledge that a 3.5% third quarter US GDP is an indication that the economy is on a sound footing, he still thinks that rising FED rates will end the current bull market some time in 2020.  He sees the market dropping 40% to 50% from it’s recent peak.  That’s quite a long way to go if you ask me before it crashes.  What happens between now and then is left quite unsaid.

CNBC offers what I think is sound advice, “Don’t panic!” They go on to suggest that the current volatility is quite normal, and to be expected.  It’s the lack of volatility that makes him nervous, like a bunch of lemmings running in the same direction as opposed to people arguing about what the future will be.  (The analogy is mine.) They go on to remind people that the economy is on a better footing than in 2000 or 2008 when considering US unemployment and earnings are still quite good.  I like the reminder that the average correction, since WWII, is 13% and last 4 months.  I do not think the next correction will be 13% nor 4 months long.  This bull has been too long, but what do I know, I’m just an engineer! They do go on to suggest that “Stock ownership should always be a 5 year hold,” saying that if you need it sooner, don’t put it in the market.

My Take on All of This

My take on all of this is the same as it has always been.  I lost some, and made it back, in the 2008 crash. That was the first one I had money for.  A friend, a lucky one, made good by timing the market crash well.  I had a idea of it when a different friend showed me historic housing rates.  I did not act then, and I am glad as he showed it to me about 6 to 9 months before the actual crash.  The fact is that I am not aware of anyone who accurately predicted 2 or more crashes.  Sure, many folks have “post-dicted” many of them, but I am not aware of anyone who got the month, let alone the day, correct twice.

So what can you do?

The only thing is to do what we all talk about in the FIRE community.  The last article I posted from CNBC had it correct.  If you need the money in 3-5 years, get it out of the market today.  If you don’t need it that soon, then leave it alone.  You will not time the market.  Maybe you want to pull some out as “dry powder” as my day trading friends call it.  There are always bargains to be found in a down market.

Maybe you want to adjust some of your savings to more bonds than stocks. That’s an idea, but that’s more timing the market to me if the reason is in reaction to the current market drop.  If you think you should be in more bonds, then you should be in more bonds.  There is always the idea of considering your age and your evolving risk tolerance.

Financial Samurai has some great suggestions about what to do in a volatile market. More to my last point, he also has some great ideas about how you should set your allocations.  He goes through a lot of different scenarios, and you have to consider each one carefully.  There are several scenarios, and any one of them, or none, may work out well for you.  You have to figure that out for yourself.

Carefully Consider Retiring in the Coming Downturn

This is not a point to say that you should not retire.  This is just a point, one I agree with from CNBC, that if the market is dropping then you will spend more of your investments early in your retirement.  If you have a lot of savings, then this is less of an issue, or hopefully not at all. Still, it is something to consider carefully.  I have seen this argument being made multiple times in multiple places.  What I would do if I decide to fully retire when the market is down, is to get a job that I can do to earn some money.  There is nothing wrong with that.  In truth, as I do plan on retiring early, before 65, but not soon, I do plan on working some doing those early retirement years.  I call it the downshift.  I will leave my grueling 9 – 5 grind, and work at my own pace on a position that I like.

What do you all think?

I would love to discuss this with you, and hear where you agree or disagree with me on any of my points.

On a side note…

I have not been posting a lot lately, and probably will post less for a few weeks as work and my wife’s work are always busy this time of year.  Hopefully I can maintain a rate of one major and a few minor posts a week, but time will tell.

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